Solar Leasing and Power Purchase Agreements, which are in all respects Energy Service Contracts, are driving the solar industry forward in California with 174% growth comparing Q1 2012 and Q1 2011. Even as the California Solar Initiative (CSI) program is winding down in Northern California, the Solar Lease is picking up the slack, especially in the residential sector.

The CSI program was designed to decrease every six months based on a calculation of market demand, with an incentive that is calculated for each job based on a model of potential output based on location, shade, angle, and orientation, with quality assurance. The program stood in as a proxy for market forced and real performance, and created a data set that allowed the transition to energy service contracts and market forces.

We should all be watching his exciting transition from a performance based public grant program, into a market that is attracting hundreds of millions of dollars of private investment and has created a value proposition that makes sense for consumers (buy guaranteed results and no risk), as well as making quality something driven not just by regulation but instead by markets mitigating risk.

This path from program to markets is also the goal of market transformation programs utilizing performance-based incentives in energy efficiency sector (such as California's Energy Upgrade California program). The goal is for market forces to step in and replace rebate programs with capacity markets and private capital investment.

Solar Leasing: Solar's Next Big ThingIf you thought the solar industry was dead in the water, think again. A fairly new concept is catching fire, and it's attracting moneyed investors: leasing residential solar energy systems to homeowners who pay a monthly fee to enjoy clean energy, without the up-front costs.